Ruling gives Skilling hope, but a long battle looms

Skilling ruling leaves much undecidedSupreme Court limits scope of federal law, but a long battle looms from prison

MARY FLOOD, HOUSTON CHRONICLE

Published 5:30 am, Thursday, June 24, 2010

Photo: PAT SULLIVAN, AP

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Former Enron executive Jeff Skilling leaves the courthouse after the verdict in his fraud and conspiracy trial in Houston May 25, 2006.

Former Enron executive Jeff Skilling leaves the courthouse after the verdict in his fraud and conspiracy trial in Houston May 25, 2006.

Photo: PAT SULLIVAN, AP

Ruling gives Skilling hope, but a long battle looms

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The U.S. Supreme Court's order Thursday that a lower court review key elements of former Enron CEO Jeff Skilling's convictions sets up months or years of further litigation in a case that already has spanned almost a decade.

In ruling on Skilling and other cases, the high court restricted prosecutors' use of an anti-fraud law making it a crime to "deprive another of the intangible right of honest services." And it told the 5th U.S. Circuit Court of Appeals to decide whether parts of the case should be dismissed or retried in Houston.

Skilling had argued that the honest services theory, as applied by prosecutors in his case, was unconstitutionally vague.

Because at least one of Skilling's convictions isn't covered by the ruling, he is likely to stay in prison over the months it will take the 5th Circuit to decide whether thehonest services error is serious enough to require a new trial or dismissal of those charges.

In its ruling Thursday, the Supreme Court rejected Skilling's argument that he couldn't get a fair trial in Houston because of massive publicity and the economic impact of Enron's 2001 collapse.

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In an opinion written by Justice Ruth Bader Ginsburg, with varying support from other justices, the court found the honest services law used against Skilling covers only bribery and kickback schemes, and Skilling was accused of neither.

The court found that Skilling did not violate the honest service statute as the court interprets it.

"There is no doubt that Congress intended (the statute) to reach at least bribes and kickbacks," Ginsburg wrote. "Reading the statute to proscribe a wider range of offensive conduct, we acknowledge, would raise the due process concerns underlying the vagueness doctrine."

Ginsburg's is one of three Skilling opinions totaling 114 pages. Justice Antonin Scalia wrote concurring in part and Justice Sonia Sotomayor wrote concurring in part and dissenting on the question of whether Skilling was able to get a fair jury in Houston.

'Extremely pleased'

The Skilling camp had hoped to see the whole case tossed out or set for a new trial outside of Houston, but his lawyer praised the honest services ruling.

"We are extremely pleased and relieved to say the least. The Supreme Court unanimously decided that Jeff Skilling did not violate the honest services law, and that is fatal to the government's case," said attorney Daniel Petrocelli.

On that issue, the court wrote: "The Government charged Skilling with conspiring to defraud Enron's shareholders by misrepresenting the company's fiscal health to his own profit, but the Government never alleged that he solicited or accepted side payments from a third party in exchange for making these misrepresentations."

Notwithstanding Skilling's victory on that point, though, it will take many months for the 5th Circuit to sort out how the honest services ruling affects other convictions, including conspiracy, said Samuel Buell, a law professor and former Enron prosecutor.

"Another big 5th Circuit battle awaits," he said.

Buell said the case isn't easily resolved for Skilling because honest services was just one of several theories the government used to support the conspiracy charge, and the circuit court also must determine how the honest services ruling affects securities fraud and other charges.

In an important footnote, the Supreme Court said the 5th Circuit concluded mistakenly that it must set aside Skilling's conspiracy conviction if any of the prongs of that conviction, honest services being only one, is legally insufficient. The high court told the 5th Circuit to take a fresh look at that logic.

Thus the high court left the door open for the circuit court to dismiss the tainted charges, send them back to Houston to be retried, or say that even without the honest services theory the government's case and the convictions still stand. There is no consensus among legal experts on where this might go.

Buell, for example, said the circuit court could leave everything in place.

Wayne State law professor and white collar law specialist Peter Henning thinks Skilling has a good chance to see most of his convictions disappear.

Skilling's was one of three honest services cases before the court along with former media mogul Conrad Black and former Alaska lawmaker Bruce Weyhrauch, whose cases were also sent back to lower courts Thursday.

The 28-word honest services statute, passed in 1988, has been used against many public officials and some corporate officers over the years, and various circuit appellate courts have disagreed on what it covers.

Losing a 'good tool'

"Although it has been much maligned, honest services was a good tool in the hands of a good prosecutor. Unfortunately, all too often prosecutors used the statute because they could and not because they should," Mateja said.

He said the ruling will torpedo some cases, but because a rewrite of this law was widely expected, a lot of pending cases were modified over the past six months.

Skilling, 56, now serving time in a suburban Denver prison, was found guilty by a Houston jury in 2006 of 19 counts of conspiracy, securities fraud, insider trading and lying to auditors in connection with the 2001 fall of energy-trading giant Enron.

Prosecutors contended Enron executives used off-balance sheet partnerships and self-dealing to create the illusion of a successful, energetic and innovative company. Enron collapsed suddenly and declared bankruptcy in 2001.

A three-judge panel of the 5th Circuit previously upheld Skilling's convictions but ordered that he be resentenced because of an improper calculation by the trial judge.

The resentencing, which would be to a lower term, has been postponed while Skilling sought the high court opinion. Yet to be decided is whether the resentencing will take place before the 5th Circuit reconsiders the other issues.

Skilling was tried by a jury before U.S. District Judge Sim Lake and alongside the late Enron chairman Ken Lay. Lay also was found guilty on several counts, but his convictions were voided because he died before sentencing.